There’s no evidence that any of them actually spoke or wrote those words, though I guess it doesn’t matter that the quote didn’t originate with someone like Franklin. What does matter is that it accurately captures something very important, which is the tendency for governments to over-tax and over-spend once people decide that it’s okay to use government coercion to take other people’s money.

But it’s still nice to be able to cite something accurate. With this in mind, I came up with my Theorem of Societal Collapse. And I think it’s actually more accurate than the vote-themselves-money quote because democracy doesn’t necessarily lead to statism. What leads to bad outcomes is democracy combined with bad values.

And a pervasive belief in redistributionism is a bad value. Heck, it’s a self-destructive value. Consider Greece. When you add together the people getting welfare and disability to the people getting pension payments to the people on the government payroll, it turns out that a majority of people in the country are riding in the wagon of government dependency.

That’s bad. But what makes the Greek situation so hopeless is that those are the same people who vote. Which means there’s very little chance of getting a government that would implement good policy.

After all, why would the recipients of other people’s money vote for politicians who support limits on redistribution?

But I’m not just blaming voters. Politicians also deserve scorn and disdain because they are the ones who often seek votes by promising to take other people’s money.

Some observers would like to believe that these politicians will use their supposed superior expertise and knowledge about public policy to make appropriate tradeoffs and prevent the system from becoming over-burdened.

But that’s somewhat naive.

Indeed, there’s an entire school of thought in economics, known as “public choice,” which is based on making real-world assumptions about the self-interested behavior of politicians and interest groups. Here’s a partial description from the Library of Economics and Liberty.

As James Buchanan artfully defined it, public choice is “politics without romance.” The wishful thinking it displaced presumes that participants in the political sphere aspire to promote the common good. …public officials are portrayed as benevolent “public servants” who faithfully carry out the “will of the people.” …public choice, like the economic model of rational behavior on which it rests, assumes that people are guided chiefly by their own self-interests… As such, voters “vote their pocketbooks,” supporting candidates and ballot propositions they think will make them personally better off; bureaucrats strive to advance their own careers; and politicians seek election or reelection to office. Public choice, in other words, simply transfers the rational actor model of economic theory to the realm of politics. …collective decision-making processes allow the majority to impose its preferences on the minority.

In other words, both voters and politicians can have an incentive for ever-larger government, even if the end result is Greek-style fiscal chaos because taxes and spending reach ruinous levels.

I call this “Goldfish Government” because some think that a goldfish lacks the ability to control its appetite and therefore will eat itself to death when presented with unlimited food.

Indeed, public choice scholars explicitly recognize that unconstrained democracy can lead to bad results.

Public choice scholars have identified…deep…problems with democratic decision-making processes.

That’s the bad news.

The good news is that their research suggests ways to compensate for the natural tendency of ever-expanding government.

Like that founding father of the American constitutional republic, public choice recognizes that men are not angels and focuses on the importance of the institutional rules… If, for example, democratic governments institutionally are incapable of balancing the public budget, a constitutional rule that limits increases in spending and taxes to no more than the private sector’s rate of growth will be more effective.

Hmmm…., a rule that limits the government so it doesn’t grow faster than the private sector.

Sounds like an idea worth embracing.

But while I like anything that builds support for the Golden Rule, I’m not sure it’s a sufficient condition for good policy.

Second, augment the internal constraint of a spending cap with the external constraint of tax competition. Bluntly stated, destructive tax policies will be less likely when politicians are afraid that taxpayers will move across borders.

P.P.S. While it’s bad news to combine democracy with bad value, I want to emphasize that the problem is bad values. Most non-democratic societies have policies that are so evil and destructive (think Cuba and North Korea) that they make France seem like a beacon of economic liberty.

[…] the bottom line. Professor Buchanan is “guilty” of believing in individual liberty and favoring constraints on government. It’s perfectly fair for folks on the left to object to those views (as well as the views of […]

[…] is very troubling. Tax competition is a very valuable liberalizing force in the world economy. It partially offsets the public choice pressures on politicians to over-tax and over-spend. If governments no longer had […]

[…] during the boom years, a spending cap is a self-imposed constraint to protect against “Goldfish Government,” which should be an effective argument for those who are familiar with the underlying fiscal […]

[…] that presume there’s a plan in Washington to strip away our rights, I do think there’s a natural “public choice” explanation for ever-growing, ever-more powerful government. And that can lead to ever-expanding examples of […]

A 2% wealth tax assessed year after year, over 50 years of productive life, leaves you only 0.36% of your initial wealth (0.98^50), so it is equivalent to a 64% tax.

So imagine placing your savings in 30 year Treasury Inflation Protected Government Bonds (TIPS) (an investment!!) with a current yield of 0.87% and paying a 2% wealth tax on it every year. Great incentive for investment, isn’t it? And great incentive for making the money in the first place!

Do you suppose that people who are intelligent enough to have become wealthy will not be able to figure that out?

We need to balance the three tax bases: wealth, sales and income; to get the lowest rates. Step two is to appreciate the family and middle class values with paired taxation. Give all the “goldfish” a choice of an income tax rate between 8% and 28% paired with a 2% net wealth tax descending to zero. The same choice for all creates an equitable balance of benefits and burdens. The small goldfish will have nothing to lose by selecting the 8% income tax and 2% wealth tax but the very large goldfish will be happy to pay a larger income tax rate to protect their millions and billions. We can tweak the equities further at both ends by letting individuals save up to $500,000 for retirement, education or health care wealth tax free and letting all wealth taxes offset estate and gift taxes. A 4% VAT, 8% C corporation tax and no payroll taxes would round out the blend.

Dan, wish you could join us in Pittsburgh on the fifth sixth and seventh. It reminded us of the great reality that unless arrested our with the school trajectory and level of debt will usher us towards an early exit influence in the world and a period of slow growth and domestic turmoil as we seek to get more and more from one another.

Neither party has been able to give leadership on this issue and I’ve come to the reluctant conclusion that major constitutional surgery is necessary through a balanced budget or fiscal. responsibility amendment. Comments?

Great article. But the real reason American republic is now failing isn’t the Supreme Court – they’re decisions, as destructive to the Constitution as they have been, are nothing more than a reflection of our failure to recognize it’s the 17th amendment that destroyed the balance of power in America. That’s what kept the central government from overeaching. That and the 16th amendment. Repeal the 16th, pass a national sales tax – no exemptions – everyone will have skin in the game and repeal the 17th amendment, and everything will quickly fall into place. Rich KozlovichParadigms and Demographics

I think it was Aristotle who lised the various forms of governments, and pointed out the fatal flaw in each. This is why some people like mixed forms of government, hoping that the faults will cancel out.

Just as leftists, and coercive collectivists in general, are naive about one day harvesting the productivity of individuals through good faith or coercion,

so are libertarians naive in believing that individuals will refrain (out of some sort of principle) from voting their fellow countrymen’s wallets in their direction, especially in the secrecy of a polling booth.

The only thing, I can think of, that might restrain widespread use of this redistribution through the polling booth is, … … religion.

And, from a secular perspective, there enters natural selection. Those cultures that uphold the (do not steal — even through the polling booth) religions or principles, are the ones that thrive and prosper in the long term. The rest become something like South America.

Constitution is essentially the innovation that Americans (and to some extent their English predecessors) added to democracy. But it isn’t panacea. It provides some inertia to the short term whims of the majority, but ultimately constitution itself is made by people and so it can be changed or re-written. And when constitution changes, a bad constitution, can actually maintain regressive inertia to decline. Case in point, European constitutions where centralized national strategies on a number of subjects (eg education, housing, transportation, industrial policy, equality of wealth outcome etc.) are to a large extent enshrined in the constitution. The end result are structurally stagnant economies that only grow one quarter to half as fast as the world average — i.e. deterministic decline.

As I have said before, those voter-lemming societies that are perpetually growing much slower than the world average, and thus drive themselves into the low growth blind alley, will eventually have to deal with the brutes of the totalitarian world. If France, Italy, but also other western European countries so prized by the American left, continue down this path of much slower than world average growth, then even Russia will grow faster and they’ll have to deal with the Putins. It is already happening. Because, ultimately, with growth structurally smaller than the world average nothing is sustainable. And what cannot go on will not go on. Unlike past times, in today’s mobile world authoritarian regimes are also restrained by international competition. That puts a limit on their oppression. That is why many people find authoritarian places like Dubai freer overall compared to France and Italy — and move there. This is not a personal endorsement for authoritarianism. It is the reality that if voter-lemmings drive their societies into 1-2% average growth stagnation then their overall competitiveness will drop below that of the more moderate amongst dictatorships and that will not end well. They will be overtaken, even by some of the more authoritarian regimes.

But returning to the post, the democratic realization that voters can harvest the wallets of distant citizens through the polling booth is what I would call the “middle intelligence trap” (which BTW may be related to the so called “middle income trap”). Higher intelligence voters realize that engaging in structural demotivation of their societies through redistribution leads to slow growth and inevitable decline (perhaps the Swiss have achieved this epiphany at the majoritarian level). Middle intelligence electorates have figured out that marking the appropriate X s on a ballot brings free benefits, at least in the short term, and thus drive their societies into the blind alley of demotivation and slow growth. Lower intelligence, or politically naive electorates,like ahem… Americans, don’t (or perhaps didn’t) know any better and thus generally refrained from redistribution, grew faster than the world average for over a century and became the most prosperous middle class in the world. What I see in America today is the citizen’s evolution to the middle intelligence level — and thus decline.

If I only had 20′ to save America, if there is one thing that you can remember from Zorba, it is this:

You cannot transition to European legislation and policy and maintain American dynamism and ingenuity. You will become European in mentality too — and vote like them — and grow like them — along a 1-2% growth trendline — to deterministic decline — drowned in a much faster growing world average.

I think this is where Americans are going. Having grown up in Europe I can recognize this movie well. So, on a personal basis, look for alternatives. When the boat starts sinking it will be too late for you and your children. The exit chutes will be jammed. Play the music of redistribution and central planning that voter-lemmings want to hear — steal their wallets — and lay the groundwork to jump ship when the boat starts sinking.